WaMu investor clears path for sale

Ailing Washington Mutual Inc. moved into a better position to find a reprieve or rescue from its mounting loan problems Wednesday after a major investor removed a potential stumbling block to a sale or another infusion of capital.

Ailing Washington Mutual Inc. moved into a better position to find a reprieve or rescue from its mounting loan problems Wednesday after a major investor removed a potential stumbling block to a sale or another infusion of capital.

The concession by the private equity group TPG came as government regulators tried to arrange a sale of the nation's largest thrift, reflecting their worries about another possible bank failure that would drain the already depleted Federal Deposit Insurance Corp.

TPG could have stymied that process because of protection that it received as part of a $7 billion investment made in April. A clause in its investment agreement could have required a buyer or another major investor to pay TPG hundreds of millions, if not billions, of dollars in addition to whatever money was injected into WaMu.

But TPG agreed to waive its anti-dilution clause, according to a Securities and Exchange Commission filing, potentially making it easier for WaMu to raise more money or for nervous banking regulators to push for a sale of the Seattle-based company.

“It became clear that it would be in the best interests of Washington Mutual and our investors to waive the … provisions,” Fort Worth, Texas-based TPG said in a statement. “Our goal is to maximize the bank's flexibility in this difficult market environment.”

The government's efforts to find a buyer, though, are being complicated by uncertainty about the magnitude of losses still lurking in Washington Mutual's home loan portfolio.

“No one knows what's in their books,” said a person briefed on the talks between regulators and banks. The person spoke Wednesday on the condition of anonymity because of the sensitivity on the matter.

After losing $6.3 billion in the past three quarters, Washington Mutual believes it is slowly healing under a new chief executive, Alan Fishman, who will receive an $8 million bonus if he can keep the nation's largest thrift alive through 2009.

“I think people do know what is in our books and we've been pretty transparent,” WaMu spokeswoman Olivia Riley said Wednesday, pointing to a financial update that the company released late last week. Those figures suggested WaMu's loan problems are becoming less severe compared to recent quarters, giving some analysts hope that the company can still be salvaged.

Nonetheless, analysts still expect the company to sustain a loss of about $1.8 billion in the current quarter ending Sept. 30. And investors are showing little confidence in WaMu. The company's shares fell 31 cents to $2.01 Wednesday, leaving the stock price with a decline of about 85 percent so far this year.

“Something needs to happen soon because WaMu is twisting in the wind,” said Bert Ely, an Alexandria, Va., banking consultant.